Facts of the Case

  • Petitioners had received interest under Section 28 of the Land Acquisition Act.
  • Income tax was paid on such interest.
  • Subsequently, petitioners claimed that such interest is not taxable income.
  • Applications for refund were filed under Section 119(2)(b) before the authorities.
  • There was a delay of nearly four years in disposal of these applications.
  • Aggrieved by inaction, petitioners approached the Delhi High Court.

Issues Involved

  1. Whether the Income Tax Department is obligated to decide refund applications filed under Section 119(2)(b) within a reasonable time.
  2. Whether delay in deciding such applications violates CBDT Circular dated 09 June 2015.
  3. Whether tax paid on interest under Section 28 of the Land Acquisition Act is refundable (issue kept open).

Petitioner’s Arguments

  • Reliance was placed on CIT vs Ghanshyam Dass HUF (2009) 8 SCC 412.
  • It was contended that interest under Section 28 of the Land Acquisition Act is not taxable income.
  • Even if tax is paid due to mistake or misrepresentation, refund can be claimed.
  • Authorities failed to act on applications for nearly four years, violating administrative fairness.
  • Non-disposal of applications was contrary to CBDT Circular dated 09 June 2015.

Respondent’s Arguments

  • Subsequent High Court rulings have held that such interest is taxable under “Income from Other Sources.”
  • Many applications were allegedly barred by limitation under CBDT Circular dated 09 June 2015.
  • Therefore, claims may not be maintainable.

Court Findings / Order

  • The Court noted that the relief sought was limited to decision on pending applications.
  • Without adjudicating merits, the Court disposed of petitions.
  • Direction issued to the Income Tax Authorities to decide the applications within eight weeks in accordance with law.
  • All rights and contentions, including maintainability and limitation, were kept open.

Important Clarification by Court

  • The Court did not decide whether such interest is taxable or refundable.
  • The judgment is limited to ensuring timely administrative decision-making.
  • Substantive tax liability and limitation issues remain open for determination.

Sections Involved

  • Section 119(2)(b), Income Tax Act, 1961
  • Section 28, Land Acquisition Act, 1894
  • CBDT Circular dated 09 June 2015

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:2350-DB/MMH23072020CW44892020_204948.pdf

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